Market news

Turkey attracts real estate investors

22.09.2008

Despite the financial crisis in the global markets, Turkey is still considered a developing real estate market, Hakan Kodal, chief executive officer of Krea Group, told the members of the press in Istanbul on Tuesday.

Krea Group is the Turkish partner of giant investment bank, Merrill Lynch, which has recently been bailed out with a $50 billion merger with Bank of America. The emerging markets loom large with their convenient investment medium, while the crisis hit the developed markets, said Kodal, assessing the credit crunch in global markets and its likely affects on the real estate sector in Turkey. “Turkey has never been on the international real estate investors' agenda as it is now. There is an increasing interest in developing markets in terms of real estate investments,” Kodal said.

“As the global credit crunch hit the developed markets, it resulted in a rise in demand in emerging markets as well as changes in spending habits. Therefore, many real estate investors plan to realize investments in Turkey, either right away or in three years,” Kodal told journalists.

There is no more chance to implement the mortgage-based financing model that allows costumers to buy purchase houses by paying rent, Kodal pointed, speaking on the current situation of Turkey's real estate market. “It has become a dream for lower income groups to become homeowners through installments as if they were paying rent. The banking sector will absolutely not be involved in this area for the upcoming five to 10 years,” said Kodal. “This would only be possible through the government releasing a very special financial package, which includes new tax incentives,” he added.

“2008 has been a hard year for the real estate sector. 2009 will not be an easy year either. The institutions with strong capital structure will emerge more powerful from this situation. Because, we will witness a decrease in the projects established with the logic of ‘I will sell it anyway,” said Kodal.

While Turkey's $30 billion mortgage market constitutes six percent of Turkey's Gross National Product, or GNP, there are 500,000 users out of 70 million people. “The sources that the banks allocate for mortgages are quite limited due to the fact that the costumers do not become indebted when they buy a real estate property. Therefore, there is no risk in Turkey's market compared to that of international markets,” said Kodal.

The crisis at the bottom:

We have seen the bottom line of the global financial crisis, said Kodal. “There will be some aftershocks and fluctuations in the markets but the markets will not experience a worse scenario in the upcoming period. However, it does not mean that the markets have survived the crisis and there will be a boom in the sector soon,” he said. “It will probably take long time for the crisis to end. But we can definitely say that the United States mortgage system has collapsed and it will never be recovered. We expect a European style global approach to the housing financing markets in the upcoming period.

“Turkey is a cheap and developing market, compared to Europe. We do not expect the interest rates to decline in the mid-term in regards to house prices. If we consider the fact that the purchasing power is likely to increase in the near future, we can say that current real estate prices are a lot more advantageous than future prices will be in Turkey,” said Kodal.